Fitch: U.S. Timeshare ABS Delinquencies Rise Modestly

on: December 06, 2013

CHICAGO, IL (December 6, 2013) — U.S. timeshare ABS delinquencies increased moderately this quarter, though they remain lower than last year’s levels, according to the latest index results from Fitch Ratings.

Total delinquencies for third quarter-2013 (3Q’13) were 3.14%, up slightly from 3.05% in 2Q’13. The increase reflects the seasonal trend that takes hold in the fall and winter. However, delinquencies are down from 3.28% in 3Q’12 and have largely normalized at their historical levels following the dramatic increases of 2008 and 2009.

Monthly defaults for 3Q’13 registered at 0.64%, a decline from 0.72% during 2Q’13 though up slightly from the 0.60% observed at the same time last year. The third quarter improvement in defaults follows the decline in delinquencies earlier this year as timeshare default trends typically lag those of delinquencies.

On an annualized basis (rolling 12 months), defaults are 8.17% for third quarter-2013, down from the 8.30% observed last quarter. Although off from its all-time peak of 9.36% in January 2010, the annual default rate remains elevated from the 4-6% levels seen pre-recession. Fitch does expect annual defaults to continue to trend back towards historical levels in the medium term.

Fitch’s Rating Outlook for timeshare ABS remains Stable due in part to the delevering structures found in timeshare transactions and ample credit enhancement levels.

Fitch’s timeshare ABS index is an aggregation of performance statistics on pools of securitized timeshare loans originated by various developers. Expected cumulative gross defaults on underlying transactions can range from 10% to above 20%. While delinquencies and defaults may vary on an absolute basis, most transactions supporting the index exhibit similar overall trends.

The Fitch timeshare performance index summarizes average monthly delinquency (over 30 days) and gross default trends tracked in Fitch’s database of timeshare asset backed securities (ABS) dating back to January 1997 and is available on a quarterly basis.

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